China's Largest Dairy Operator Suddenly Crashes 90% To Record Low, Muddy Waters Says "Worth Close To Zero"

Tyler Durden's picture

In December 2016, Muddy Waters' Carson Block said China's largest dairy farm operator, Hong-Kong listed China Huishan Dairy Holdings Co., is "worth close to zero" and questioned its profitability in a report. Today, with no catalyst, it suddenly almost is. The stock collapsed over 90% in minutes to a record low.

The sudden crash wiped out about $4.2 billion in market value in the stock, which is a member of the MSCI China Index.


In December, Muddy Waters alleged that Huishan had been overstating its spending on its cow farms by as much as 1.6 billion yuan to “support the company’s income statement." The report also alleged that the company made an unannounced transfer of a subsidiary that owned at least four cow farms to an undisclosed related party and Muddy Waters concluded that Chairman Yang Kai controls the subsidiary and farms. Those findings came from several months of research including visits to 35 farms and five production facilities, drone flyovers of Huishan sites and interviews with alfalfa suppliers, according to the report. Muddy Waters said it has shorted Huishan’s stock.

“It will be even harder for Huishan to get funded in the capital market after the report, amid a couple of earlier allegations that have raised some red flags to investors,” said Robin Yuen, an analyst at RHB OSK Securities Hong Kong Ltd. Still, Huishan’s shares and operations are unlikely to “collapse” due to its high share concentration and sufficient cash flow generated by its dairy business, he said by telephone.

About 73 percent of Huishan’s shares are held by Champ Harvest Ltd., a company that’s in turn 90-percent owned by Yang. A buying spree by Yang had supported the shares last year, making it a painful trade for short sellers. A one-year rally of about 80 percent through a peak in June had made the shares expensive.

Well that is all over now!!

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xythras's picture
xythras (not verified) Mar 23, 2017 11:11 PM

Looks like they stopped milking that. But they still have the coal industry.

Not for long though

Jobs and Confidence Return to West Virginia Coal Country

Midas's picture

Efficient markets at work.

NidStyles's picture

Can't imagine milk being a huge thing over there in China seeing as how lactose tolerance is actually a European genetic trait. It's actually the defining trait that is used to classify someone as a descendant of the original Germans and Teutons. I don't think any of the Han's are lactose tolerant, as I think the Indo-European split happened before the Germans evolved into being a definable people.


Strange that China would have use of a dairy of any size with that in mind.

absente reo's picture

I thought lactose intolerance was something more characteristic of Afro Caribbeans.

NidStyles's picture

No, lactose intolerance is an universal trait among all animals. It's the actual norm for all life. There are only few species and sub-species that are lactose tolerant.

Lactose tolerant meaning that they can drink the lactose of other animals, in this case cows, and actually process it without an allergic or intestinal reaction. By reaction, it usually means a rapid purging of your bowls.

There are some species that will die if they drink the milk from another animal. Some species of cat will actually suffer from kidney failue if they drink milk in any real quantity.

Buck Johnson's picture

I know what you mean, I'm partially or semi lactose intolerant.  Everytime I drink milk (especially chocolate milk) I get the bubble guts an hour later and I need to go to the bathroom to take a shit.  I thought it was me because I didn't know about he bowels thing.





Offthebeach's picture

10 pint size White Russians ( Grande Blancos ) kind of make me nauseous and I have to change up to some Pina Colladas...

techpriest's picture

The Mongolians to the north consume a lot of dairy, including something I can best describe as "candy cheese jerky." You can find it in Hohhot, though unless you know someone there, you will probably never have a reason to go. (they play up tourism i.r.t. Mongolian culture, but if you are flying out you might as well go a little farther to actual Mongolia).

After this, I saw a lot of yogurt for sale in Beijing, but butter was hard to find, and jugs of milk are much smaller.

I haven't spent as much time in the southern regions. Maybe it's even more rare there.

NidStyles's picture

Cheese is not the same as dairy in all aspects, it lacks lactose most of the time, so it's not really an indicator of lactose tolerance.


Yogurt and butter are close, but even those are very low in lactose.


Really, the only way to determine lactose tolerance is to drink milk.


I was thinking the Han, as they are genetically related to Europeans. It's perfectly possible for some Mongolians to have this trait as well considering the close proximity and cross breeding nature of that region, but they would still have it due to the genetics of the Indo-Europeans. Basically the people that came from the fertile crescent, because they sort of invented and perfected farming and animal husbandry.

Golden Phoenix's picture

The only people who say cheese, yogurt, and butter don't cause lactose intolerance issues are those who are either only mildly intolerant or not at all.

Kinda like a prediabetic saying Type I diabetics don't really need insulin, just diet and exercise.

Neither knows wtf they are talking about.

Amicus Curiae's picture

of course UNLABELLED milk thats basically from cows  in pain from rBgh abuse in america and elsewhere its used globally..

wouldnt have anything at all to do with intolerance to dairy would it?

because 50yrs ago   lactose intolerance was damned rare

the odd kid needed goats milk instead of cows


same as GMO soy/corn in everything and glyphosate spraytopped wheat etc wouldnt be partially responsible for the IBS/gluten issues  doing a massiver ise either i guess?

Buck Johnson's picture

Cheese also, they aren't a big consumer of cheese.


Stinkytofu's picture

dairy products are not popular here in the south.  most milk comes in 250ml cartons, UHT.

occasionally you will find fresh milk, also in 250ml cartons, but more likely to find "milk drink",

sort of a watered down milk-ish flavorored kool-aid.

yogurt available, most sold as a yogurt drink.  the package even says in english "open here"

even though it can't be opened by hand.

not much cheese outside of the major chains with a small import section for foreigners.

if found, it's usually of the kraft processed "american" cheese style.

nowadays, real cheese and butter can be mailordered on taobao.

in guangxi, up until recently, we made our own cheese from water buffalo milk......


Tarjan's picture

Cow milk is a regular in the grocery carts of the Han with children here in Sichuan. So I rather doubt they are having any problem digesting it.



roddy6667's picture

Most of the milk sold here is UHT Ultra High Temperature pasturized and comes in 240cc pouches. No refrigeration needed. Chinese don't drink much milk or consume much in dairy products. In America, there is such a surplus of milk that it is routinely poured down the storm drains. There is so much surplus cheese that the government stores millions of pounds of it in caves to eventually become Government Cheese. Every dairy farmer in America is on welfare. If the subsidies were removed, most dairy farms would close overnight.
Which country has capitalism and which has socialism? Both have socialism, but America has more in the milk industry.

1manrme's picture

No crying over spilled milk?

Vlad the Inhaler's picture

Yang put the shorts out to pasture with that textbook pump and dump.

HRH Feant's picture
HRH Feant (not verified) Mar 23, 2017 11:16 PM

Muddy Waters. You can't make this stuff up.

Did the dairy farm sell real milk or fake milk like the fake eggs sold in China? Mix cardboard with plastic and dye and you have another fake food for sale in China!

Buck Johnson's picture

I'm thinking that is what happened, this stock essentially went from something to nothing (less than  penny stock).  And this is over financials that could be argued one way or another, no they found out something else about the milk and they know fake milk (like the eggs) could literally destroy the company.  Also they could have been selling that milk also to other countries.


ebworthen's picture

Hell, looks like the S&P 2007-2008.

666 always true valuation these days.

Fascal rascal's picture
Fascal rascal (not verified) wachtamrhein Mar 23, 2017 11:38 PM

Cows lives matter

Librarian's picture

Are melamine futures also down?

Hey, there's got to be a trade in here somewhere.

Atomizer's picture

What's the matter, IMF is trying to meet quotas. Shutdown Bitcoin to establish SDR. Hello CD. Not upset with you. We go back many years. You bought the Zerohedge T shirt which had CNBC on it. Your child turned up while eating breakfast. You found the missing Zerohedge shirt. Remember? 

Life Inside a Secret Chinese Bitcoin Mine - YouTube

DaveA's picture

Customers discovered that their "milk" was actually white lead, melamine, and water.

rockstone's picture

Ahhhhhh. A Flint Caucasian. I hope they're heavy on the vodka.

Bananamerican's picture

"let them drink coal"

Atomizer's picture

When people lying are caught, we will take them down. That includes you CD. Friendly reminder.

Why don't you join me over at 4chan. We can make your head spin and blow up. I can't advise Deep Web sites. You can't even handle Zero Hedge. 

We love Tyler. Never forget. We will protect this site as the sun arrives in the east every morning. With or without your commentary. That's a promise. I didn't make it to OECD today. Perhaps tomorrow. 

Sandmann's picture

Bet they bought a lot of Vancouver real estate and farms in UK

Sledge-hammer's picture
Sledge-hammer (not verified) Mar 24, 2017 12:45 AM

Well, if the chinks dairy is anything like the rest of their sh*tty products, it was probably discovered that they were substituting White-out for the milk.

Blazing in BC's picture

Explains why I can never get a milkshake at a Chinese restaurant.

roddy6667's picture

So the stock is worthless because the corporation is not making a profit? Does this mean that Amazon and Tesla and a thousand American stocks are now worth ZERO?

Fiberton's picture

Technically Tesla is worth less than Zero if there ever could be such a thing. People own the stock for hope and dreams of the futures. One day unless some magic happens or someone buys the company that stock goes to Zero. Look at AMD. They lose almost 1/2 billion a year. Zero net profit corporations are for all mathametical purposes worth Zero. Hope adds temporary value.  The market is just a big hope machine. When the hope runs out markets collapse. " Stay short my friend "

roddy6667's picture

I never miss a chance to poke fun at Tesla fans. It's soooo easy.

peterk's picture

in australia , milk crashed to $2  for 2 llters and  farmers wereout saying "how will ipay th emortgage, we need govt intervention".. that was a few years  ago and since then they got all excited about selling  milk to the chinese.. prices went up a but locally

Now  i bet any money the farmers will crying  again, they have more debt and mortgages to support at $1 per liter  retail.

All farmers here are on life support also, except when times are good.. you dont here anything from them.

Once a professor  went on radio and said farmers should stop farming..... big mistake, the fella  was crucified publically

and he was forced to retract the statments.

In Australia , REAL ESTATE, BANKS, MILITARY, FARMERS.....  can never be criticised, if they are, your asking for it!

Iconoclast's picture

We all need to get off baby cow juice; lactating cows deliver it as a hormone boost to their young, HTF we've become addicted to it is a mystery. And giving it up would help stop animal agriculture being the biggest pollutant on the planet.

Grandad Grumps's picture

Maybe it is just because the Chinese don't eat cheese.

bluskyes's picture

The cow must have died